Preview - I by IMD Issue 17 - March 2025 - How to Win Back Trust

HEALING SPLITS IN A DIVIDED TEAM An easy-to-use diagnostic tool can help rebuild trust and confidence in dysfunctional teams.

#17 March 2025 / 20 CHF

HOW AI CAN IMPROVE YOUR WORLD A Google business strategist explains how AI could transform your business and be a force for good.

HANDLING AN ALL-POWERFUL BOSS How to deal with a leader who breaks the accepted norms of civility, empathy, and ethical decision-making.

HOW TO WIN BACK TRUST ibyimd.org

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[ Foreword ]

Trust is fragile and precious ... we must handle with care In his article, Ben Bryant connects trust and leadership with vulnerability, which surprised me when I first read it. He explains that sharing personal information (disclosure), being honest (feedback), and asking difficult questions (provocation) are ways for leaders to show vulnerability. Trust is built in the moments after people share their vulnerabilities – this is what Ben (Bryant) calls the dance of trust. These actions, when done genuinely, build deeper connections and trust.

In geopolitics, rising tensions force countries to reconsider whom they can and should trust. In an interview, Ros Taylor, author of The Future of Trust, explores how globalization’s uncertainties have eroded institutional trust, shifting confidence toward individuals. Meanwhile, Sander van der Linden examines how large-scale misinformation threatens societal trust and asks: instead of correcting misinformation, how can we build resilience against it?

Artificial intelligence presents another challenge to trust. In “Big Brother or a Brave New World?”, Michael Yaziji makes me want to reread the classic books by George Orwell, Aldous Huxley, and Neil Postman, reminding us why underestimating AI’s impact would be a monumental mistake. At the same time, Gopi Kallayil, Google’s Chief Business Strategist for AI, emphasizes that, despite its risks, AI also has the potential to improve lives, businesses, and societies.

Imagine these three scenarios: you’re about to sign the most expensive contract of your life with a general contractor to build your new home – your main point of contact for the next 18 months. You’re selecting a four-week language course abroad for your teenage daughter. You need to schedule a long-postponed surgery and sign the admission forms.

Illustration: Jörn Kaspuhl

What these decisions have in common is the uncertainty surrounding the process and its outcome. Now, picture each scenario in a situation where you cannot trust the contractor, the language school, or the surgeon. How does that make you feel? Conversely, how would you feel if you had complete trust in them?

Just imagining these contrasts likely triggers an emotional reaction – because trust is everywhere and matters deeply. Without trust, cooperation becomes too costly. Yet, in today’s world, trust feels harder to maintain, making it even more crucial. That’s why I am excited we chose “trust” as the theme for this issue of I by IMD. I hope the articles in this issue resonate with you as much as they did with me.

They pushed me to reflect on trust from multiple angles.

Trust isn’t just a global issue – it’s personal, too. Michael Watkins offers a diagnostic tool and roadmap to rebuild trust and confidence within dysfunctional teams – the first crucial steps toward a future of high performance. George Kohlrieser advises leaders to foster trust by embracing honesty, vulnerability, and integrity, particularly in conflicts and negotiations.

As you explore this issue, I encourage you to reflect on your own experiences with trust – whether in personal relationships, professional settings, or society at large. Trust is fragile yet essential. It can never be claimed, only earned. ■

Stefan Michel, Professor of Management, Dean of Faculty and Research

March 2025 • I by IMD 1

[ CONTENTS ] 04 [ In good company ] Emulating Silicon Valley’s VC-driven model for innovation is not easy.

Jerry Davis explains how Detroit, the Motor City, is finding success following an alternative route.

HOW AI CAN IMPROVE YOUR WORLD A Google business strategist explains how AI could transform your business and be a force for good.

HANDLING AN ALL-POWERFUL BOSS How to deal with a leader who breaks the accepted norms of civility, empathy, and ethical decision-making.

HOW TO WIN BACK TRUST ibyimd.org ONLINE_17_IMD_Edition_March_2025_COVER_ONLINE.indd 3

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[ Rebuilding trust ] Trust is a valuable but increasingly rare commodity. In this issue, we offer expert advice on tackling misinformation and winning the trust and respect of all stakeholders.

Cover: Image generated using Midjourney V6 @ paulandcat

06 Building trust with colleagues is like an intricate dance routine.

Ben Bryant explains the steps you need to take.

11 Trust in institutions has not recovered despite political changes, economic shifts, and corporate engagement in social issues, according to the 2025 Edelman Trust Barometer.

14 People can be immunized against false or manipulated information through a set of simple exercises, writes Sander van der Linden.

18 Michael Skapinker explains why all organizations need a plan to

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[ Technology ] 34 In a world of hallucinations and deepfakes, Öykü Işık and José Parra Moyano offer a practical checklist to help ensure you can trust your AI systems.

36 Artificial intelligence is evolving at a rapid rate. The IMD AI Safety clock helps you assess the risks.

38 AI could bring a dystopian future if we don’t fight against the convergence of micro-surveillance and digital inertia, argues Michael Yaziji.

secure trust during, after, and even before a crisis hits.

20 Michael Watkins offers a diagnostic tool to rebuild trust and confidence within dysfunctional teams – the first step toward a future of high performance.

24 Ros Taylor, author of The Future of Trust, discusses how globalization has fractured trust in institutions and triggered a renaissance of faith in the individual.

26 Companies pursuing ESG goals face pushback from shareholders. Corporate governance changes may be needed to restore trust on both sides of the social and political divide, argues Jordi Gual.

29 Trust is the bedrock of effective leadership. George Kohlrieser explains why executives must take a more emotionally intelligent approach.

30 In Coaching Corner, Angelica Adamski explains how to take positive steps to build mutual respect, trust, and understanding with a new boss.

32 In A Board's Eye View, Peter Voser suggests six steps boards can take to help their organizations navigate an unstable era of mistrust.

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41 Conversely, Gopi Kallayil, Google’s AI business strategist, insists AI could be a powerful force for good if used boldly and responsibly.

[ Communication ] 44 It’s time to ditch tired old phrases. Peter Meyers explains how to sharpen your language skills to become a more effective leader.

47 TIME magazine cover designer D W Pine stresses the importance of visual simplicity and clarity to convey your message successfully.

50 [ Diversity ] New EU legislation requires stronger female representation on corporate boards. Diana Markaki offers guidance on navigating this transition.

52 [ Brain circuits ] A diagnostic created by Jennifer Jordan and Alexander Fleischmann will determine if you're ready to meet the targets for greater boardroom diversity.

53 [ World view ] If the Cold War was like a simple game of checkers, then today’s world is more akin to a game of 3D chess, writes Richard Baldwin.

Photos: Geri Krischker, Appolinary Kalashnikova via Unsplash, Wikipedia, Stine Heilmann, Midjourney V6 @ paulandcat, © S72 Business Portraits

HEALING SPLITS IN A DIVIDED TEAM An easy-to-use diagnostic tool can help rebuild trust and confidence in dysfunctional teams.

#17 March 2025 / 20 CHF

Publisher International Institute for Management Development, Ch. de Bellerive 23, P.O. Box 915, CH-1001 Lausanne | Switzerland

Editorial Advisory Board

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Stefan Michel Professor of Management, Dean of Faculty and Research, IMD

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Christine Batruch Sustainability Advisor, Lundin Group; President, Bohdan Hawrylyshyn Family Foundation Vincent Bieri Co-Founder Nexthink; Member of the Board of Advisors Trust Valley Jean-Philippe Bonardi Professor of Strategic Management and former Dean at HEC Lausanne, University of Lausanne

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Kate Byrne, Chief Executive, Katapult X Des Dearlove, Co-founder at Thinkers50 Michel Demaré Chairman of IMD; Chair of the Board at AstraZeneca Plc. and Nomoko AG; member of the supervisory boards at Vodafone Group Plc and Louis-Dreyfus Company International Holdings B.V.

58 [ Diversity ] Effective DE&I strategies enhance performance but are facing increasing resistance. Josefine van Zanten and Luca Condosta advise on how to convince the naysayers.

Cynthia Hansen Managing Director of the Innovation Foundation, empowered by the Adecco Group

62 [ Leadership ] Merete Wedell-Wedellsborg offers three ways to deal with an all-powerful boss who breaks the accepted norms of civility, empathy, and ethical leadership.

65 [ The human factor ] When it comes to trust, a leader’s action speaks louder than words, says Shelley Zalis.

66 [ In depth ] Salvatore Cantale and Frederikke Due Olsen present four strategies to ringfence your operations and supercharge your sustainability drive.

Prince Michael of Liechtenstein Founder and Chairman of Geopolitical Intelligence Services AG; Chairman of the European Centre of Austrian Economics Foundation in Vaduz; Member of STEP

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72 [ Face to face ] Julie Linn Teigland of Ernst & Young tells Howard Yu that leaders are not all-powerful and shouldn’t be afraid to say, ‘I don’t know.’

74 [ CEO questionnaire ] Antje Kanngiesser, CEO of Alpiq, a Swiss-based electricity producer and supplier, reveals what inspires and motivates her.

76 [ Afterword ] David Bach says business leaders must be a beacon of stability in a world in turmoil.

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Ann-Marie Sevcsik​Catalyst of social change through innovative partnerships Michael Skapinker Financial Times contributing editor Ian Charles Stewart Executive in Residence, IMD; Main Board Director Trustee International Institute for Sustainable Development; Co-Founder of WiReD Magazine Su-Mei Thompson CEO at Media Trust Editorial Delia Fischer, Matt Falloon, Ken Toner Art Director Catharina De Gregorio Printing Copytrend SA Lausanne

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March 2025 • I by IMD 3

[ In good company ]

T

he economic vibrancy of Silicon Valley has inspired generations of local economic developers seeking to copy its recipe for success. The once-sleepy suburban “valley of heart’s delight” was transformed into the center of the global tech economy, with perhaps the highest concentration of wealth in human history. Any geographic feature can be drafted into this effort to replicate this transformation: Silicon Slopes (Utah), Glen (Scotland), Prairie (across the US), Gulch (California), and more.

All are premised on the idea that clustered, high-growth entrepreneurship, typically funded by venture capital, is the shining path to a richer future and a more secure tax base.

These efforts almost inevitably fail. Few have attracted vast pools of venture capital, and none have matched the Silicon Valley model's exuberant success: the San Francisco Bay area habitually tops the league table for VC, followed by New York and Boston, while Austin has managed to stake a claim as a plausible alternative tech hub.

Many regional developers have tried and failed to emulate Silicon Valley’s VC-driven model for innovation.

Jerry Davis explores how Detroit, the birthplace of Ford, is following an alternative route – with promising results

There is not just one path to growth, as Suntae Kim, Assistant Professor of Management and Organization at the Johns Hopkins Carey Business School, and others have shown. A community's assets – not a trendy model nor return-hungry venture capital – can prove a powerful source of economic vitality.

The arc of Detroit industry Detroit was the original Silicon Valley in the first decades of the 20th century. A city of a quarter of a million residents strategically located on a river across from Canada, it was home to producers of railroad cars and locomotives, carriages, bicycles, and a large sector of machine shops. Local innovators such as Ransom E Olds and Henry Ford were able to build auto companies out of these locally available parts, and their early success attracted suppliers and competitors that quickly established Detroit as the hub of an essential new industry. The dense ecosystem of suppliers germinated hundreds of competitors.

Ford launched the moving assembly line in 1913, and the astonishingly high employee turnover prompted by its mind-numbing repetitive jobs led the company to offer wages of $5 per day early the following year.

Such high wages for unskilled work attracted migrants from around the world and underwrote the Great Migration from America's South.

By 1930, Detroit had over 1.5 million residents, making it America's fourth-largest city – a place of vast wealth and diversity and all the creativity and tensions these bring.

Detroit's rich cultural diversity was not matched by industrial diversity, however. The economic mobility offered by employment at a handful of industrial giants created a strong gravitational pull, and the oppor-

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Illustration: Jörn Kaspuhl

The Motor City takes detour away from Silicon Valley orthodoxy

But what if venture capital is not the essential ingredient for economic transformation through vibrant entrepreneurship? What if there are more enduring recipes that draw on local factors? This idea is being tested in communities across the US – including Detroit, the birthplace of 20th-century mass production.

tunities for entrepreneurs tended toward efforts to supply the dominant local industry. Detroit was effectively a one-trick town, and it would pay the price for its monolithism.

By the time the city reached its peak population of 1.8 million in 1950, the auto industry was already scheming to disperse production to lower-cost venues with weaker labor organization. Between 1948 and 1963, Detroit lost 130,000 jobs, primarily due to restructuring in the auto industry. The growth of international competitors and the oil shocks of the 1970s left the city’s automakers reeling and prompted a decades-long decline in population: by 2020, Detroit had roughly 640,000 residents, about the same as when the assembly lines fired up a century earlier.

The abandoned Michigan Central train station, built in 1913, became a symbol of economic decline and urban decay.

Entrepreneurship and place What could replace the auto industry and salvage the Motor City's economy? Despite its industrial history and the dominance of giant automotive companies, Detroit evolved a distinctive entrepreneurial terroir during its troubled times. Those who spend time in the city know that everyone seems to have a side hustle – a business (or two or three) they work on during evenings and weekends. Moreover, the vibe is one of mutual assistance rather than competition: entrepreneurs help each other out, knowing nobody else will. The defiant T-shirt slogan "Detroit vs. Everybody" might be read by outsiders as hostility, but within the city, it's about collective resilience in the face of endless challenges. When big industry left Detroit, it was left to the people to improvise alternatives.

Kim went deep into the weeds to understand this system. He spent years in residence at two very different business incubators: ACCEL, a Y Combinator-style accelerator (which typically provides seed funding and networking connections), and GREEN, an alternative incubator aimed at growing local enterprises for community benefit (ACCEL and GREEN are pseudonyms). He followed four startups at each site, attending meetings and pitches, interviewing founders, employees, and funders, and closely watching how these enterprises navigated their early months.

What he found was stark: startups growing up in the Y Combinator model almost inevitably moved away to access venture capital and rapid “scaling up” opportunities, leaving behind little benefit for the city. In contrast, those at GREEN grew more like an oak tree, “scaling deep” to set down strong roots that tied it to the community. Kim and his co-author, Anna Kim, tracked the subsequent performance of these firms and wrote a series of articles on what they mean for entrepreneurial ecosystems.

The lesson seems clear: if the aim of ecosystem builders is local economic vibrancy and uplift, then the Silicon Valley model is likely to be a bust. I have pointed out in previous columns that VC-backed firms

‘On any given Saturday, hundreds of Detroiters gather to make connections, gain insights, build community, receive or offer coaching, and be inspired by the success of their neighbors’ don't create jobs even if they go public – and the vast majority never get to IPO. Adding a couple more millionaires to the local tax rolls might be nice but it will not revive the local economy. If not the VC model, then what?

Modular startups A recurring theme of this column is "Nikefication" and what it means for business. The massive vertical integration pioneered by Ford in the 20th century has been replaced by relentless vertical disintegration in the 21st. All the parts of an enterprise – supplies, assembly, software services, distribution, even labor – are like Lego bricks that can be assembled into a pop-up enterprise. Even auto startups in the US increasingly look more like Nike than General Motors, with some foregoing production altogether in favor of design and marketing.

The COVID-19 pandemic nudged millions of prospective entrepreneurs to take advantage of this new situation. In the US, 19 million founders filed the paperwork to start a new business after 2020, of which five million expected to have employees – a reversal of a 40-year decline in startup rates. These businesses tended to be tiny, often headquartered in suburban homes and not in downtown cores. Moreover, their asset-light model requires much less capital than old-timey enterprises – no need for venture capital to launch a pop-up.

It may be much cheaper to start a new business now, with access to inputs from around the world, but what happens to "terroir"? What might Detroit –or any other city –do for a placeless snap-together enterprise?

The Detroit alternative to Silicon Valley Detroit's entrepreneurial revival offers clues to what one model for a vibrant local ecosystem might look like. For one thing, after over a century, Ford is back to its birthplace, having revived the once-abandoned, iconic Michigan Central train station and created a lustrous Beaux-Arts showpiece downtown. Next door is the home of Newlab, an incubator focused on mobility and energy and home to over 100 startups.

Michigan Central is also the venue for Black Tech Saturdays, a remarkable community of entrepreneurs, professionals, funders, and »

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[ In good company ]

community members building new businesses and tech capabilities with a strong culture of mutual support. On any given Saturday, hundreds of Detroiters gather to make connections, gain insights, build community, receive or offer coaching, and be inspired by the success of their neighbors.

Detroit has also been experimenting with new and different ways of funding business. Venture capital continues to be heavily concentrated in America’s coastal states – particularly California, New York, and Massachusetts. As an alternative, online investment platforms such as Honeycomb Credit and Wefunder allow small businesses in the middle to raise capital from local investors. The SEC’s Regulation Crowd Funding (Reg CF) enables enterprises to raise up to $5m and allows “non-accredited investors” (essentially, not-rich people such as a business’s customers and neighbors) to participate. These non-accredited investors make up the overwhelming majority of the population. In addition to standard loans and equity, alternative formats such as revenue-sharing agreements can provide more flexibility than traditional loans. Detroit is also home to several Community Development Financial Institutions (CDFIs) and is piloting vehicles such as the Diversified Community Investment Fund. The digital revolution is catalyzing a diversity of new streams to fund business that better fit the aim of scaling deep rather than scaling up.

The enterprises populating Detroit are often very different from the VC-funded startups intended to metastasize quickly through the most generic recipe possible. Detroit’s emerging enterprises are more like the “GREEN-style” entrepreneurs shown by Kim and others to grow into community-positive oak trees that can drive local uplift. They might be JustAir, a platform founded by Darren Riley that is placing a network of air quality monitors across the city to provide critical data for residents and health professionals. Or Pingree Detroit, a worker-owned cooperative launched by Jarret Schlaff that employs military veterans to create shoes and other goods from leather cast off by the auto industry – and was part-funded via Honeycomb Credit. Or Empowerment Plan, founded by Veronika Scott to provide employment and skills training for women experiencing homelessness by manufacturing coats that turn into sleeping bags – also intended to help unhoused people. Or Chening Duker’s Pluck. eco, aiming to make zero-emission delivery affordable for local stores by solving the “last mile” transit problem.

Given its heritage of design, its entrepreneurial culture of mutual support, and its willingness to experiment with alternative finance, will Detroit be the new model for a more sustainable 21st-century form of enterprise? ■

JERRY DAVIS is the Gilbert and Ruth Whitaker Professor of Business Administration and Professor of Sociology, at the University of Michigan’s Ross School of Business. He has published widely on management, sociology and finance. His latest book is Taming Corporate Power in the 21st Century (Cambridge University Press, 2022), part of the Cambridge Elements Series on Reinventing Capitalism.

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